A reborn deficit colossus is slouching towards Gomorrah while our growing economy refutes any pretext for such obsessive profligacy. Am I being too harsh? Not based on the data. Since we are talking economics, data are kind of important.

GDP growth was double expectations for January at 0.6 per cent. That made for what BMO Capital Markets chief economist Doug Porter called “rip-roaring” annualized growth of above five per cent for the last three months. Significantly, growth was broad-based, encompassing manufacturing, transport, retail, mining and — surprise! — oil and gas extraction. It was also triple the Bank of Canada’s estimate of real growth. So the recent deficit budget, advertised by the Liberals as anti-cyclical, is really pro-cyclical.

David Rosenberg, chief economist at Gluskin Sheff, points to a major accomplishment for our modest country. Canada led the G7 in average annual GDP growth from 2010–15 at 2.3 per cent. That was achieved with a high dollar, then a low dollar, an oil price collapse and the related energy-induced downturn, which is impressive since every other G7 country is an energy importer. Braggadocio aside, it substantiates the success of Canada’s fiscal policies, including keeping taxes low, spending disciplined and moving to a budgetary balance, none of which were hallmarks of the other advanced economies. Nor are they of apparent interest to the current government.

What everyone should acknowledge, in spite of relentless protestations to the contrary, is that the Liberal government was not left with a deficit. It was left with a surplus. For the fiscal year starting in April 2015, there were budgetary surpluses since October, culminating in a surplus of $4.3 billion for the first 10 months to January.

From that surplus we have moved from a “modest” deficit promise of $10 billion during the election campaign, to triple that in the budget. Furthermore, there will be deficits as far as the eye can see and, by the end of this government’s mandate, debt will have increased by $113 billion.

It is fascinating that while the Department of Finance forecasts another surplus in February, it is sticking with a $5.4 billion deficit for the fiscal year. That means that we will see a deficit for March alone, the last month of the fiscal year, of more than $10 billion. That’s quite a feat of spending, but I suspect the government is up to it. You see, it has three reasons it wants to deliberately run a deficit for fiscal 2015–16. First, to conceal the fact that the Conservatives left behind a surplus. Second, to blur the sharp contrast between an inherited surplus and four years of large deficits. And third, to move some of this year’s spending into the last month of the just-ended year, making the deficit seem a bit smaller for 2016–17, which will be seen as the start of this government’s fiscal legacy.

The government has largely backed off the key justification for deficit spending: the stimulus argument. It is now talking about long-term “investments,” which the Liberals maintain will eventually create growth. However, program spending as a percentage of GDP is set to rise from 12.9 to 14.6 per cent next year. In effect, the budget is creating a long-term structural deficit, with ongoing obligations that are nearly impossible to cut back. Furthermore, much of the relatively modest $11.9 billion identified as “infrastructure” spending is actually for social and environmental programs, not productivity-enhancing construction. And how much will the quality of new infrastructure be sacrificed by local politics, the push for “shovel-ready” projects and the move away from private sector involvement?

One mitigating factor in the budget is an unusually large $6 billion contingency fund. On the other hand, significant committed spending has not yet been accounted for. Then there are the risks of interest rate increases as the economy strengthens and of a recession, which happens on average every eight years.

Maybe it will turn out well. Perhaps oil prices will recover rapidly, global growth will increase, the U.S. will maintain its buoyancy, GDP will surge in Canada, but somehow interest rates will not rise too much and we will avoid a recession. If it does not work out, the government can blame the one-percenters and further hike job-killing taxes. Mind you, even in a sunny world, there are still the interest payments to make and an additional $113 billion in debt for our children to pay off. Just remember that whatever excuse is given for all this deficit spending, it cannot be justified by a faltering economy.

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